Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business Expenditure - Allowability of HEAD OFFICE EXPENSES Disallowance of amount out of head office expenses was not valid in law where method adopted by assessee had been followed by it consistently and Department had accepted method in earlier years [In favour of assessee] CIT v. S.I. Property Development Ltd. [2009] 312 ITR 177 (Mad.) The assessee-company was engaged in the business of construction of flats, contract work and real estates. During the year, the assessee-company was being converted into a public limited company from a company in which public were not substantially interested. The Assessing Officer was of the opinion that the head office was controlling the project and, therefore, some expenditure of the Madras head office should be allocated for the project work for determining the profit. The Assessing Officer disallowed Rs. 17,31,851 out of the head office expenses. The Tribunal deleted the addition. Held that the issue involved in the present case had been formulated as a question of law in respect of the assessment years 1987-88 and 1988-89 and was agitated before the Court CITv. S.I. Property Development Ltd. [2002] 256 ITR 601 wherein it was held that since the method adopted by the assessee had been followed by it consistently and the Department had accepted the method in earlier years, it would not be fair to the assessee to change the method in the current year. Following the above decision the issue was to be decided in the assessee's favour. Arun Kurian Joseph and Mrs. Pushya Sitaraman for the Appellant. JUDGMENT K. Raviraja Pandian, J. - The Revenue is on appeal under section 260A of the Income-tax Act, 1961, against the order passed by the Income tax Appellate Tribunal "B" Bench, Chennai, dated July 10, 2003, in I.T.A. No. 415/Mds/1996 by formulating the following question of law : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the disallowance of Rs. 17,31,850 made out of the head office expenses and also the addition of 10 per cent, of Rs. 1,73,185 towards estimated profits on contract receipts is valid in law ?" 2.…

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